Diary of a Financier

Top Newsstuffs (September 21-27)

In Bookshelf on Sun 27 Sep 2015 at 05:10

Top reads from the week that was…

Macro

Manufacturers’ durable & capital goods (August 2015) | US Department of Commerce
Although the data beat consensus expectations, across-the-board downward revisions to prior month data send ytd growth deeper into the red; inventory draw-downs continue, leaving a chance that growth resumes once we lap comps’ high base in October report (due to last year’s pent-up demand recovery):
Core durable goods (ex-transportation)Core durable goods & capex (% change yoy, 2015.08)
    Orders: -0.1pp @ -2.1% ytd, unch mom (beats -0.2e)
    Shipments: -0.3pp @ -0.3% ytd, unch mom
Core capex (nondefense, ex-aircraft capital goods)
    Orders: -0.1pp@ -3.5% ytd, -0.2% mom
    Shipments: -0.4pp @ +0.8% ytd, -0.2% mom
Inventory (ex-transportation)
    Inventories: -1.0pp @ +0.8% ytd, -0.3% mom
#Bearish #Deceleration

Gross Domestic Product: Third estimate (2015q2) | Bureau of Economic Analysis (BEA)
Another upward revision beats expectation, with ytd growth suddenly exceeding trend — despite scares from initial data amidst record snowfalls in the Northeast, California port shutdowns & the $USD’s spike.
Consumption is notable as it is finally starting to net-out the energy crash’s drag (albeit hard to resolve w weak Retail Sales & Durable Goods data):
Real GDP (Q2): revised +0.2pp @ +3.9% qoq saar (beats +3.7e)
    Inflation: Core unch @ +1.2%; Headline unch @ +1.5%
    Consumption (PCE): +0.5pp @ +3.6%
    Investment: -0.2pp @ +5.0%; Residential +1.5pp @ +9.3%; IP -0.3pp @ +8.3%
    Government spending: unch @ +2.6%; Federal unch @ unch; State & local unch @ +4.3%
    Exports: -0.1pp @ +5.1%
    Imports: +0.2pp @ +3.2%
    Inventories: +0.2pp contribution to GDP growth rate
Real GDP per capita (Q2): +3.2%; 9.8% below LT regression trend
Real GDP (Q1): unrevised @ +0.6% qoq saar
Real GDP (FY14): unch@ +2.4% yoy
Real GDP (FY13): unch @ +1.5% yoy
Real GDP (FY12): unch @ +2.2% yoy
#Bullish

Credit

NYSE margin debt & balances (August 2015) | Doug Short (dshort.com)
All measures relent, retracing precipitously from highs in coordination with market correction; expect more of the same with Fed rate hikes nearing:NYSE margin debt vs SPX (real gross & net, 2015.08)
Nominal margin debt: +2.1% yoy, -2.9% mom @ $473B
Real margin debt: -2.7% mom; -5.2% from record high (4/2015), but still far above prior highs from 3/2000 & 7/2007′s before those bear markets
Net margin balances (“buying power”): +8.6% mom @ -$188B debit; continues recovery from record low, but still crushes prior records from 2000, 2007 & 2011
[See also: Margin debt/NYSE ratio constant since 2007 & Margin debt/SPX ratio constant since 2007]
#Bearish #Leverage #Latent indicator

Loans & leases in bank credit, all commercial banks (2015.09.09) | St. Louis Federal Reserve (FRED)
Lending growth remains at healthy trend, meeting historical average:Loans & leases in bank credit, all commercial banks (weekly, %yoy) 2015.09.09
Weekly loan growth: -0.2pp @ +7.8% yoy
This is a key indicator, as I’d expect continued expansion due to household & corporate balance sheets being most deleveraged as any point since the 1970s, but the private sector may be suffering from post-traumatic strike — a hangover from the crisis (like “Depression Babies”).
[Previously: Total consumer indebtedness sends neutral signal]
#Bullish #Releveraging $XLF $KBE $KRE

Fundamentals

Stock market correction amidst earnings recession | Barclays & Richard BernsSPX ntm EPS growth (%) & Fed Funds less SPX ttm EPS growth (bps)tein Advisors
SPX ntm EPS growth consensus turns negative for the first time postcrisis.
The big questions is:
Is the Fed tightening at the wrong time, or are investors just discounting the rate hike?
#Bearish? #Downward revisions

Sentiment

Retail investor sentiment survey (2015.09.23) | American Association of Individual Investors (AAII)
Sentiment remains a tailwind, but not quite near extreme lows amidst this market turmoil; neutral cohort maintains extremes — an indication of healthy uncertainty:AAII retail investor sentiment survey- bulls/bears 2015.09.23
Bull/Bear ratio: +10bp wow @ 1.12 (below both 1.30 historical average & 1.80 extreme high, but above 0.8 extreme low)
Bullish: -1.1pp @ 32.1% (under both 39.0 avg & 45 extreme high, but above 30 extreme low); remains near postcrisis low
Bearish: -0.4pp @ 28.7% (between 30.0 avg & 25 extreme low, but below 40 extreme high)
Neutral: +1.6pp @ 39.2% (above 31.0 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 2/2016).
[Previously: Retail allocations neutral, Institutional allocations neutral & Strategist allocations are bullish signal]
#Neutral #Contrarian

Interests

Shinzo Abe announces new policy to stimulate Japanese economy | Bloomberg
Japan’s PM announced three new arrows to “combat the demographic woes facing Japan… put the brakes on the trend toward an aging population & the falling number of children & keep the population at 100M [in] 50 years”:
1. GDP target:
Increase from ¥500T to ¥600T
2. Fertility rate:
Increase from 1.43 to 1.8 births per woman by increasing support for families
3. Social security:
Increase support for workers who also care for elderly relatives
[Previously: Abenomics policy measures]
$DXJ $EWJ $JPY

–Romeo

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